ACCUSED OF MISCONDUCT Over the past three days HEP Director Ivan Mravak has suffered serious media censure for malversations in the company, and has been accused of signing damaging deals for the long-term procurement of electricity Croatian Prime Minister Jadranka Kosor will not for the moment launch procedures to make changes in top management at Croatian Electric (HEP), Nacional has learned from sources close to top Government officials. The Prime Minister made her decision after having received the preliminary findings of two separate investigations into HEP's purchases of electrical energy over the past five years, which Government commissioned from the Hrvoje Pozar National Energy Institute and the privately-operated Ekonerg institute for energy and environmental protection. According to the information Nacional has, both institutions carried out due diligence of HEP's contracts on the long term acquisition of electric power, and in their initial findings established that the transactions were carried out in line with existing legislation and the rules of the profession and in keeping with the principles of the company's good management. This, for now, refutes accusations levelled at HEP CEO Ivan Mravak that his illegal activities and misconduct in the procedure of importing electric energy caused damages to the company to the tune of several hundred million euro.

It was based on these allegations, made in the domestic media, that powerful individuals within the ruling coalition had exerted massive pressure on Jadranka Kosor these past weeks, demanding that she sack Mravak. Jadranka Kosor temporarily rejected these demands, and commissioned two separate investigations from two respected domestic expert institutions. Given that the initial findings of these institutions practically concur in their conclusions that no irregularities were found, it is logical that the Prime Minister will not for the moment move to dismiss Mravak.DR. GORAN GRANIC, Director of the Hrvoje Pozar Energy Institute, which has drafted an expert analysis of HEP's long term electrical power acquisitions for Government

But, these are only preliminary findings, and a final ruling on the legality of the operations surrounding the purchase of electricity in HEP will not be possible until the investigation is completed, and that is forecast for some three weeks from now. These findings only concern the long term contracts to purchase electric power, which covers about 60 percent of the total amount of energy HEP purchases. Short-term acquisition, on the other hand, made on a monthly, weekly, or even daily basis, is significantly more complex, and is based on the fluctuations of prices on energy exchanges, and that is why their analysis will take longer.

But, as far as HEP is concerned and the allegations levelled at its top managers, the key accusations were in fact concerning the contracts on long term acquisition the Croatian firm had concluded with foreign companies EFT, Korlea and Rudnap, and on which HEP had allegedly lost millions. It was precisely these contracts that the experts at Ekonerg and Hrvoje Pozar Institute had analysed over the past few days.

As Nacional has learned, each of these contracts, and the entire HEP system of public acquisition of electric energy, was analysed from a number of different aspects. They were analysed in terms of whether the process was led in line with the current legislative framework, if the tenders were carried out in line with international transparency standards, and if their results were comparable with the results of other countries in the region. HEP's electrical energy procurement system is, namely, identical to systems used in other European countries like Hungary and Slovakia. That is why a comparison with the results in these countries and the prices of electricity local energy companies paid for can easily establish whether HEP signed contracts during a given period above market prices. The preliminary investigation has uncovered no such irregularity, even though it should be pointed out that the subject of the investigations was not to establish whether HEP had over a certain period, and on the basis of certain contracts, recorded losses.

If, namely, the entire acquisition process was carried out in line with legal norms and the rules of the profession, losses themselves are not a basis on which the HEP leadership could be accused of misconduct. It was for this reason precisely that the subject of the investigation was set as the period from 2004 to 2009. By analysing a period of this length, experts can make much more precise evaluations of whether possible losses at HEP were the result of a business policy or the objective circumstances on the market.

NO INDICTMENTS Mladen Bajic will not be filing indictments if the investigations do not reveal violations in HEP operations It is clear in this context that the final findings of these two investigations will play a significant role in deciding whether legal action will be launched against the HEP top management. And while the local media last week published that the State Attorney's Office had already drafted charges against Ivan Mravak accusing him, among other things, of concluding damaging contracts, it can be assumed that there will be no such official indictment until the investigation is completed. They are aware, namely, at the State Attorney's Office that the validity of the body of the indictment is based in fact on the conclusions of the investigation. If it reveals irregularities, it will then get a formal foundation in expert findings, while if the findings are of the opposite nature, it is very likely that a significant part of the indictment will have to be amended. In this context it is very likely that the State Attorney's Office will wait for the final version of the investigation's findings, and based on earlier statements, Jadranka Kosor will also certainly not launch any personnel changes in HEP's top management until then.